Study: Bay Area leads state in falling home prices

Interest rates climb and home prices fall, with Bay Area homes tumbling faster than anywhere in the state, a new study says.

Real estate experts expect home prices in California and the Bay Area to slide 8 percent more this year, SiliconValley.com reported.

Tech layoffs, recession fears and a rocky stock market have dampened prices since the middle of last year, affecting home values that hit record highs during a pandemic buying boom.

But the biggest factor cooling the region’s once-scorching housing market are higher mortgage rates. Home payments costing up to thousands of dollars more have squeezed out buyers.

“There’s still buyers out there, but they have to have some intestinal fortitude to buy in this market,” Jeff LaMont, a real estate broker with Coldwell Banker Realty in Burlingame, told the Bay Area News Group site.

The median price of single-family homes in the Bay Area was $1.08 million in December, an 11.5 percent drop from November and 9.6 lower than December 2021, the largest declines of any region in the state, according to the latest report from the California Association of Realtors.

Despite the slowdown, December’s median home price was 19 percent higher than in December 2019, with prices still not falling to pre-COVID levels.

The decline can be blamed, in part, on a sharp drop in high-end home sales that may be driven by uncertainty among well-paid tech workers, who have lost jobs in droves, Oscar Wei, a senior economist with the Association of Realtors, said.

On Friday, Mountain View-based Google announced it was laying off 12,000 employees, though it wasn’t immediately known how many of those would be in the region. This week, Amazon said it would chop 200 more Bay Area jobs, a sign of perhaps more tech layoffs to come.

Bay Area home prices climbed higher than anywhere else in California last year, so they’ve had the farthest to fall.

Last year “just got really bumpy real quick,” Janine Hunt, an agent with Red Oak Realty in Oakland, told SiliconValley.com. “We knew it was coming. What goes up must come down.”

The real estate association predicts California’s median home price of $822,150 in 2022 will fall 8 percent this year. Wei said he expects the Bay Area to follow a similar trend.

The big question is what happens to mortgage interest rates.

“With interest rates seeming to be softening a little bit, there’s a chance we might do a little bit more than what we projected,” Wei said.

Last week, the average rate on a typical 30-year-fixed mortgage was 6.2 percent. That’s down from more than 7 percent in November, but almost double the historic-low rates from a year ago.

The typical monthly payment on a $1 million home in the Bay Area is now $6,166, according to a Realtor.com calculator. At the same time last year, it would have been $4,862.

The shift has helped send total home sales in the region plummeting 37 percent year over year in December, according to the Association of Realtors. Meanwhile, homes stayed on the market for an average of 28 days last month, compared to 13 the year before.

With the busier spring homebuying season approaching, real estate agents expect sales to pick up as buyers and sellers adjust to the new market.

— Dana Bartholomew